Most likely due to the size restrictions on DSiware (around 16mb) There isn't much room for devs to make sure the graphics look nice.

That's not entirely true. There are many retail DS games that are 16MB or less (though file sizes are rounded up to fill up the maximum capacity of the cartridge), so there aren't really any excuses for devs to be cutting corners as far as 2D visuals are concerned (though few, if any DSiWare games would have the capacity to feature full motion cutscenes).

It varies from game to game, of course. For instance, Professor Layton and the Lost Future looked just fine on the 3DS, however, the compression artifacts in the cutscenes appeared to be far more obvious than on the DS Lite.